NYT’s Hansell on Broadband Stimulus “Hooey”

Some sensible thinking here about broadband pork stimulus plans from Saul Hansell of the New York Times. In his piece on the NYT Bits blog this week, “Does Broadband Need a Stimulus?” he argues that people should stop grumbling about the “relatively small sum” of $6 billion that the new administration has proposed for wiring rural areas and urban centers. Hansell argues:

This also seems to be a rather sound policy choice because, as I look at it, the noise about a broadband gap is hooey. With new cable modem technology becoming available, 19 out of 20 American homes eventually will be able to have Internet service that is faster than any available now anywhere in the world. And that’s without one new cable being laid.

That fact hasn’t prevented a lot of folks involved in telecommunications policy from calling for a lot of money to be spent on backhoes and cable riggers. For example, the Communications Workers of America and the Telecommunications Industry Association called for $25 billion in subsidies to network providers as well as tax breaks. The Free Press, a group that advocates for media diversity, recommended spending $44 billion, with an emphasis on subsidizing companies to compete with existing cable and phone companies.

Running a new fiber-optic cable to every American home may well increase competition in broadband providers, but it isn’t needed to deliver high-speed Internet service. Current cable modems use just one of the more than 100 channels on a typical cable system and can often offer speeds of 16 megabits per second or more. The next generation of modems, using a technology called Docsis 3, allows several of those video channels to be combined to offer what ultimately can be Internet service as fast as 1 gigabit per second — 10 times faster than is offered in Japan, which generally is regarded as having the fastest broadband infrastructure.

What is most significant about Docsis 3 is that it turns out to be quite inexpensive to upgrade existing cable systems to use it. As a result, Comcast and other cable systems are already deploying the technology rather quickly. In other words, with no government intervention, the country is going to have the infrastructure very soon to provide almost everyone with the fastest possible Internet service.

To be sure, Verizon and, to a much lesser degree, AT&T, are already building out fiber-optic-based networks that compete with the cable companies in broadband, voice and video. Clearwire, a venture that includes Sprint, is building a wireless broadband network.

Certainly, competition often lowers prices and increases choices. But it is hardly clear that the country would get an adequate return from subsidizing what is essentially duplicate capacity.

Amen to all that. Plus, Hansell might have cited the 70 years of experience we have with universal service programs, which have proven to be the very model of waste, fraud, and abuse that many tax-and-spenders claim they now wish to avoid. Moreover, those inefficient subsidies have discouraged competition in rural areas. If we only subsidized McDonalds in rural area, do you think Burger King, Taco Bell or any other fast-food chain would have ever come to town? But that’s basically the way this racket has worked in the telecom world for years.

Adam Thierer / Adam is a senior research fellow at the Mercatus Center at George Mason University. He previously served as President of the Progress & Freedom Foundation, Director of Telecom. Studies at the Cato Institute, and Fellow in Economic Policy at the Heritage Foundation.